NZX halts trading in dairy derivatives on information errors over GDT forecast offer

NZX Regulation, the supervisory arm of the stock market operator, has placed a trading halt on dairy futures and options after technical errors led to discrepancies in information detailing how much product Fonterra Cooperative Group plans to offer in next week's GlobalDairyTrade auction, a benchmark for the derivatives.

Trading was halted at 11.07am today "pending a correction to the announcement regarding the Fonterra Offer Quantities for the GlobalDairyTrade (GDT) auction released yesterday afternoon," NZX Regulation said in a statement. The technical errors are understood to relate to differences in skim milk powder and total volume data published on the NZX website and in the Fonterra statement.

Fonterra yesterday released a statement yesterday afternoon saying a change in its supply/demand balance led to an increase in its forecast offer volumes over the coming 12 months by 7,530 metric tonnes, of which 6,210 tonnes will occur in the next three months and the remainder coming in the following four months.

"WMP (whole milk powder) offered by Fonterra on the GDT auction is the main contributor to the change with a 2,480MT increase over the May to June period," Fonterra said. "AMF (anhydrous milk fat) is the second largest contributor with a 2,000MT increase over the June to September period, while Cheese has been increased 1,675MT over June to December."

Fonterra also scaled back its forecast offer of Australian skim milk powder by 1,210 tonnes over the next 12 months, about half of which would occur in the next three months.

The Reserve Bank this week warned persistently low dairy prices could put stress on indebted farmers operating with negative cash flow this season, that could taint the wider financial system if it stressed lenders' loan books.

Governor Graeme Wheeler told Parliament's finance and expenditure select committee this week that the bank estimates prices will return to an equilibrium price over the medium term of between US$3,200 and US$3,800 per tonne, though market pricing only suggests it will rise to about US$2,700/tonne by the end of the year.

(BusinessDesk)